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What Happens to Your Social Security Benefits When You Die?

If you rely on your spouse’s Social Security check to pay your bills — or if your spouse relies on yours — you need to understand what happens to that money when the recipient of those benefits dies.

Depending on the timing, your financial institution may have to return payments to the government. And that can leave you (or your surviving spouse) without the money needed to buy groceries or pay bills.

“It’s the hardest thing in the world to say to a widow, ‘No, I can’t let you have that money, I have to send to back,’” says LuAnn Kohlmann, vice president of WACHA, which educates financial institutions on how to deal with government payments. She adds, ”The financial institutions aren’t doing it be mean. They are required to do it.” Kohlmann explains how it works:

Financial institutions are required to return to federal agencies any payments received after the date of death of the recipient. This can include Social Security, VA benefits, civil service annuity or other federal benefit payments. A complete list can be found in the federal Green Book. It does not include certain payments like tax refunds, however.

A spouse or beneficiary may be entitled to that money eventually, but the financial institution is required to return it to the government agency, which will then provide the beneficiary with information on how to collect it.

A financial institution may be notified of the customer’s death by the agency through what’s called a “death notification entry (DNE)” or they may find out when the spouse or another family member lets them know that their loved one has died. Some financial institutions may follow obituaries.

Either way, “once they have knowledge of death, they become liable for all federal payments received after date of death,” says Kohlmann. If the financial institution didn’t find out about the death for several months, it may wind up holding the bag if the money was spent by a spouse or joint account holder. Financial institutions “get something called a reclamation. That’s a form they get from government agencies. They are liable for every dollar on that reclamation,” she explains.

If having even a single Social Security payment returned would create financial difficulties for you or your spouse, try to prepare as best you can by reading Social Security’s information about benefits after someone dies. Other government agencies will provide similar information about claiming final benefits. In the event of a spouse or partner’s death, contact that agency immediately to try to claim the benefits to which you are entitled.